Story of World’s Richest Investor
Do you remember what you were doing when you were 6 years old, when warren was 6 he used to buy chewing gums from his grandfather’s shop, and go to people’s home and sell it for a profit.
He was having 2 cent profit in every sale. Then he started earning more profit when he was buying coke of 20 cent from the shop and selling it for 25 cent and he was getting 5 cent profit.
At a very young age he decided if he did not become a millionaire at 35 then he will jump off from the tallest building of Omaha.
He was a very curious child. When he was young he used to do very different calculations, like he used to write number of every car passing by. He thought, if someone gets robbed near his home then he will give all these numbers to police.
He also collected bottle caps to know which drink is most famous, coca-coca was most famous.
He wants to know, singers who sing songs of god lives longer than normal singers, and after so much calculations he came to know they all live same life. People who sing songs of god have no greater advantage in age.
He has done his first stock market investment when he was 11. He had 120 dollars by selling coke and chewing gum. After so much research, he bought 3 shares of cities service. He also convinced his older sister Doris to invest.
After some day stocks fell and his sister used to tease him because she lost his money because of him. After some time stock went up and he withdrew his money and booked a $5 profit. Then the stocks rise so high that one share reached $202. There he learned his first lesson that “have some patience”.
After that he started selling newspaper because he is getting more profit than chewing gum and coke. At 14 he collected $1000. He was good in numbers, but still afraid of talking to girls. He thought he should work on his physique after he bought a dumble set.
He said “no matter how many curls he has done, his arms never get muscle”.
He had tremendous interest in reading; he used to spend his maximum time in Benson library in Omaha reading financial books. After reading some books, he got a book which could make his 1 million dollar dream to be true.
The name of the book was $1000 ways to earn $1000.
The key idea of the book was how money compounds. The idea was if he buys a weighing machine and it took 100 days to buy another one, then it will take 50 days to buy third one, 33 to another, and so on.
He didn’t buy a weighing machine but bought a 2nd hand ping ball machine and placed it on a barber shop and shared some profit to barber. After some time they were having so many machines and everyone started recognising them. After some time he sold this business for $1200.
Then he bought 40 acre land for $1200 and talked to a farmer if he’ll work in this land then he will share some profit with him. After 5 years he sold that and for double the price. And he made a lot of profit in 5 years.
He never liked collage but in the last year he started studying accounting, it was his favourite class and he said “accounting is the language of business”
At 19 he was having $9000, and he was having too much money compared to his friends. But the goal was 1 million dollars.
In 1949 Benjamin Graham launched his masterpiece book “The Intelligent Investor”. Warren liked his ideas so much and started reading companies.
Then he thought he should go to higher studies, Stanford rejected him, but it was good for him because Benjamin Graham was professor in Columbia University.
He not only was a professor, but he had a firm Newman Graham firm. And he used to give examples of real companies and share his investment ideas. And all students used to buy those shares.
Warren was the first student who got A+ in his class. Benjamin was chairperson of the government employee insurance company. After that they named it as GEICO. It was an insurance company in which Warren invested a lot of money and also made a lot of profit.
Before investing in GEICO he wanted to know working of the company so he went to a branch. Then he talked to assistant of president and it was a pretty long talk. When he understood everything he invested 65% of his savings in the company and after 1 year the share prize went 1.5 times and he withdrew all his money.
Warren was not happy because he can’t impress any girl with his investing skills. In 1950, younger sister of warren booked a date with a girl named Susie Thompson. But she was in a relationship with a boy, but luckily her father didn’t like the boy. Warren went to her father so many times and made an impression: In 1952 he married Susie.
He took financial statements with him when he went on a honeymoon. In 1958 he bought a house of $38000, which he said his worst investment because he was not getting any return. He still lives in the same house.
He wanted to work with Benjamin but he was a jew and only give jobs to jews. After 3 years Benjamin agreed and Warren was his first non jew employ. He was so happy that he went to New York 1 year before joining. They paid him $1000 per month.
Later Benjamin understood Warren is best, and when he wanted to retire in 1956, he talked to Warren and he said “NO” and took retirement at 26. Then he opened a company called Buffet associations limited. Which included 7 family members who invested 105,000 in the company.
Warren said that no one will ask where he invested, how much he invested, investing and withdrawing will only be allowed in December. Everyone thought he was doing a fraud, but now everyone knows it was real.
After giving fees of warren, everyone was 10.7% more interest than index in the time span of 1957–1961. Now Warren was a master in managing money and he opened 10 more partnership firms. In 1962 he combined all firms and named it buffet partnerships limited.
At 32 he made 1 million and accomplished his milestone. He was using cigar butt strategy. We can understand it with an example:- If someone left a smoked cigarette, still 1–2 puffs are left. Likewise, if we buy stocks of a company going down, then we can make a profit from that. But it’s not an excellent strategy to invest a lot of money.
On one dinner party Warren met Charlie Munger their interest was same, so they connected very well and Charlie challenged his strategy and said, “instead of buying company share for small prize we can buy growing company shares lower than their intrinsic value”. Now we know they are best friends.
Now as of 2020 his net worth was 85.6 Billion dollars.